Mary McBroom told us her story at a closed Starbucks restaurant in Detroit. It's one we've heard too many times before: For 18 years she worked hard for her employer, GE before discovering GE cared less about her than she did about the company. Mary was not an unskilled worker: she wired circuit boards, most recently for Chevy Volt charging stations. Hired in 1991, she was a college graduate who had worked her way up in the company from entry level wages to $23 per hour in 2009.
Along the way, she raised two daughters and sent them to college, bought a house, saved for retirement, and did all the things "responsible people" do. Mary is a college graduate with a passion for giving her job her all. Even as she told her story, it was evident that more than feeling angry, she was hurt.
In 2009 GE laid Mary off due to the economic downturn with the promise that there was always a possibility she could be called back. On May 13, 2011 she was called back to the same job she had before the layoff. GE trumpeted the recall as a Big Move, publishing a "Welcome Back" to the eleven employees.
Yet, on her first day back she was told that she was classified as a "competitive wage" employee, and would be paid $13 per hour to do the same work she had been paid $23 per hour to do. She was expected to work alongside co-workers making the higher wage who had managed to get their 20 years of service so they could be considered "legacy employees." Worse, some of the coworkers receiving the higher rate had been hired one week before Mary. Whether they escaped the layoff or there was another reason, the inescapable fact was that employees were working side-by-side doing the same work, but one employee was paid $13 per hour and the other was being paid $23.67 per hour, and everybody knew it.
Mary's shock quickly turned to action, and she wrote to Human Resources in June, 2011 asking them to reconsider her classification and asking about the status of her pension, which was based on years of service and compensation levels. She also wrote a letter to Jeffrey Immelt expressing her concern that she was being recalled to a job she had done well for 18 years, only to suffer a 40 percent pay cut.
GE's response was to send out an investigator to assess the situation without interviewing any of the "competitive wage" employees causing supervisors and coworkers to be hostile to those who complained. In a second letter to Jeffrey Immelt on September 30, 2011, Mary and her fellow "competitive wage" coworkers asked Immelt to intervene and restore her pay to its former level.
On November 20, 2011 she and her fellow competitive-wage coworkers were laid off again without notice and after putting in an extraordinary number of overtime hours to make up for the difference in pay. This time, the layoffs were permanent. McBroom's position, along with 13 others, was being eliminated entirely. Those jobs would not be coming back. In a statement to the local newspaper, Human Resources manager Billy Futch said the layoffs came after they had "tried to avoid the move." He cited slow orders for Volt charging stations, but also said he anticipated "this will turn around soon."
Yet he let 14 workers go, permanently, right after they had asked for parity in compensation to other workers in the plant with comparable years of service and skill sets.
This graph highlighted Monday by Brad DeLong is a shocking visual representation of Mary's story:
The gray bars are recessionary periods. The line represents the average percentage change in workers' salaries.
Mary says she felt as though she was loyal for 20 years to a company that disrespects her. It's difficult to argue with her on that point. The group of us listening to her story that night felt a collective outrage for her situation.
Jeffrey Immelt has been with GE for 30 years. Over the past six years, his average compensation has been $10.26 million per year. That's $5,130 per hour, give or take. About 395 times Mary's hourly wage. Immelt could have given up $30 per hour and kept three employees. The whole 14 employees could have stayed on if he gave up $140 per hour. After all, they were expecting orders to pick up at that plant, right? To Immelt's credit, he did give up his paycheck in 2009, but honestly, I doubt it stopped him from making his mortgage payments or sending his kids to college.
If Jeffrey Immelt leaves GE, he walks away with over $100 million in GE stock and deferred compensation benefits along with exercisable, vested stock options. If he stays until retirement, he can expect to receive a large pension and many other benefits. I'm assuming health insurance for life will be one of them. Meanwhile, GE terminated its pension plan for new employees, despite the fact that it was fully funded and has been for years.
As for GE, the company? It hasn't paid taxes that help fund schools or roads or the highways their products roll down on the back of 18-wheelers for several years, despite Immelt's protestations at this year's shareholders' meeting, which I attended as the holder of a legally executed proxy. Unfortunately, GE "lost" my name from their proxy list along with about 50 others holding similar proxies, so I was exiled to a room downstairs with a video feed, where I heard Immelt justify GE's low, low US income tax rate to applauding one-percenters in the room. Rather than paraphrase, I will just quote the annual report:
Our consolidated income tax rate is lower than the U.S. statutory rate primarily because of benefits from lower-taxed global operations, including the use of global funding structures and our 2009 decision to indefinitely reinvest prior-year earnings outside the U.S. There is a benefit from global operations as non-U.S. income is subject to local country tax rates that are significantly below the 35% U.S. statutory rate. These non-U.S. earnings have been indefinitely reinvested outside the U.S. and are not subject to U.S. income tax.
We expect our ability to benefit from non-U.S. income taxed at less than the U.S. rate to continue, subject to changes of U.S. or foreign law, including, as discussed in Note 14, the expiration of the U.S. tax law provision deferring tax on active financial services income.
In between those two paragraphs there is this statement: Income taxes (benefit) on consolidated earnings from continuing operations were 29.5% in 2011 compared with 7.3% in 2010 and (11.6)% in 2009. Later in the report, GE reports a $1.5 billion benefit due to lower foreign tax rates in 2011. That's $1.5 billion that isn't reducing the United States federal deficit, creating jobs, or building roads and bridges. The majority of the increase in taxes for 2011 came as a result of GE's partial sale of NBCU to Comcast, which was also offset by ongoing losses and writeoffs over at GE capital. Despite the protestation that GE pays its fair share of taxes, it goes without saying that paying their fair share to other countries doesn't really do a lot for this one.
In 2011, GE increased its workforce in the United States by 10,000 employees. In that same year, GE increased its foreign work force by 18,000 employees. After adjusting for the NBCU employees taken off the rolls due to the 2011 Comcast merger, less than 50 percent of the employees employed by GE's consolidated companies were United States employees. The actual percentage of US employees was 43 percent. The other 57 percent represent 170,000 jobs that are not going to American workers.
As for Mary McBroom, she's not sure what to do next. Her girls are still in college and she still has a mortgage to pay. Jobs are scarce in North Carolina, and she's fairly certain there isn't going to be one where she can earn the salary she was earning at GE. And make no mistake, she was earning it. She gave them a day's work for a day's pay until they decided a day's pay was worth 60% of what it was the day before, and then ultimately decided they didn't want her day's work at all.
This is why Mayday matters. Today's demonstrations are one way to stand up and tell the GEs and Jeffrey Immelts of the world that this system isn't working for Americans. Loyal workers are being laid off or having their pay cut by nearly half while GE holds earnings "indefinitely" outside the United States in order to avoid taxation while shareholders of GE saw a return on equity of 11.9 percent in 2011.
Disrespected? Yes, I'd agree with that. During and after last week's shareholders' meeting, about two thousand workers came to Detroit's Renaissance Center, stood up and told Mr. Immelt, the board of GE, and the one percent what they thought about GE's corporate citizenship. Here's just a little taste of what that was like:
Part one of a series on US corporations, employees, and taxes.